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Citing a ‘fiscal black hole’ amounting to of £22bn, new chancellor Rachel Reeves has announced a series of measures as part of her overhaul of the public finances, three weeks after taking office.
Describing the fiscal inheritance as “Unforgivable” the chancellor outlined what she called “the real spending situation” that “resulted in a projected overspend of £22bn hole in the public finances now – not in the future”.
And Reeves announced that the “Necessary and urgent work” to “fix the mess that they’ve created”. Reeves said that she now plans to reduce the “black hole” by £5.5bn this year, and over £8bn next year.
In a scathing speech, in which she repeated the mantra: “If we cannot afford it, we cannot do it”, Reeves accused the former government of covering up the true extent of the black hole in the public purse, and outlined a series of decisions to cancel, pause or downgrade a series of what she called unfunded commitments made by the previous government.
They included scrapping the winter fuel payment for pensioners who don’t receive benefits, a review of the Conservatives’ New Hospital scheme, which had so far only delivered one of the 40 new hospitals pledged, a review of the migration system that, allied with the already announced binning of the previous government’s Rwanda policy, cancelling two transport projects – works on the A303 (the Stonehenge tunnel), A27 (Arundel bypass) as well as scrapping the Restoring our Railways scheme.
She has also cancelled the retail sale of the government’s remaining NatWest stake and will sell it privately in 2025 instead, in order to deliver value for money for taxpayers.
Accusing the previous government of making “commitments that weren’t worth the paper they were written on”, Reeves highlighted an overspend of £6.4bn on asylum in this financial year, alongside a £1.6bn overspend on rail projects. In response the chancellor said she was tasking ministers and civil servants with finding a further £3bn of cuts this year.
In response to the “mess” she said she inherited, Reeves accused the previous government of hiding plans from the OBR, she confirmed the launch a multi-year spending review which should allow more long-term planning, she says. Under that new plan, final budgets for this year and next will be announced alongside the budget on 30 October.
In order to support and encourage better long-term planning, Reeves said she would create a new Office of Value for Money, to make public spending more effective, as well as appointing a commissioner to recover money spent on Covid contracts that was not justified. She also confirmed that the Treasury to would in the future share detailed departmental spending plans with the OBR, and for spending reviews to have at least a two-year time horizon.
